A lot of (proverbial) ink has been spilled discussing how to compensate V1 users who lost funds. It’s been a difficult situation for the entire DAO. While V2 is a clear improvement and Perpetual Protocol is better off for it, the material losses incurred by many V1 users are damaging to the DAO’s reputation. Making matters worse is the negative price performance of the PERP token, making the PERP based proposals even more difficult to implement fairly.
This post will outline a simple way to fully reimburse affected V1 users. This proposal does not require the sale of PERP.
Value Token buy-back
The DAO can take example from other organizations that have had to reimburse their communities in a safe and fair way, namely as a result of hacks. This proposal is modeled on bZx’s reimbursement program. There are similarities to what was reposted by @RDL last week.
All affected V1 users will receive a single P100 token for each $1 of PnL they lost. Each P100 token will be entitled to be repurchased by the Perpetual Protocol DAO for $1.00.
A liquidity pair will be seeded between P100 and a stablecoin or ETH on Uni v3.
Perpetual protocol commits to making recurring purchases of P100 tokens from this new liquidity pool with % of the fees destined for the treasury on an hourly/daily/weekly basis.
The recurring purchases will end when all P100 tokens have been repurchased and burned.
Assuming the treasury collects ~$5k/day or $150k/month or $1,825,000/yr for the foreseeable future, below is the amount of time it would take to make V1 users whole, assuming all affected users hold their P100 tokens. Of course the goal is for the DAO to grow, which would lead to repayment happening much faster.
|Amount to be repaid||Time required @ current revenue|
In practice, however, holders would not have to hold this long.
P100 holders that require immediate liquidity can choose to sell their P100 tokens into the liquidity pool. There will likely be a material amount of sellers that will prefer to retrieve some of their funds immediately. This sell pressure will make the repurchases less expensive for the DAO. P100 holders who wish to get reimbursed in full can simply wait until buying demand from the DAO’s recurring repurchases leads to a trading price in the liquidity pool close to $1.
At any given point in time, the ultimate price of the P100 token in the liquidity pool will reflect the holder’s opinion on whether or not they can get more yield by waiting for Perpetual Protocol revenue-based repurchases or by selling and deploying the capital elsewhere.
Partnership opportunity: Cinch
We are putting forward our platform, Cinch, as an implementation partner for Perpetual Protocol.
A partnership with Cinch has two distinct advantages:
1) Immediate value for the PERP community. Our extensive network of institutional DeFi investors and market markers is looking to deploy capital into these kinds of token opportunities. By listing P100 tokens through Cinch, the price of the P100 token will be supported by buying demand on top of Perpetual Protocol’s recurring purchases so that affected V1 users can cash-out of their P100 position faster.
2) Save and protect development resources. All of the infrastructure can be setup in a matter of minutes by a non-technical team member via Cinch’s platform.
Benefits & Risks
Benefits to Perpetual Protocol
- Positive signaling to the market
- Improved DAO reputation
- No dilution or sell pressure on PERP token
- Extremely easy and quick to setup through Cinch
Benefits to affected V1 Users
- Reimbursement in full (depending on amount chosen)
- Immediate liquidity
Benefits to Cinch
- Grow ecosystem partners
- Bring new asset to investor network
We would really love to hear the community’s feedback on this proposal. Hopefully this provides the basis for something everyone can come out to vote on. Of course the next step would be a Snapshot vote if this generates enough conversation.